Netflix, Inc. (NASDAQ:NFLX) added a whopping four million new subscribers during the fourth quarter last year. And more than 50% of them are domestic subscribers. But before tasting success, Netflix, Inc. (NASDAQ:NFLX) had, at one point, proposed a deal with Blockbuster LLC which could have ruined the Los Gatos-based company. Until 2000, it had only 300,000 subscribers, and depended on USPS to deliver its DVDs. Netflix was losing money.
Netflix should have thanked Blockbuster
So, the company’s founder Reed Hastings went to Blockbuster with a proposal. He offered to sell a 49% stake in Netflix, Inc. (NASDAQ:NFLX) to Blockbuster just to take the latter’s name. The offer valued Netflix at just $50 million. In contrast, Blockbuster was a big video rental service provider with more than 7,700 brick-and-mortar video rental stores worldwide. According to Netflix’s former CFO Barry McCarthy, Blockbuster’s John Antioco laughed at Hastings proposal. Eventually, it turned out to be the best thing for Netflix and the worst nightmare for Blockbuster.
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Netflix, Inc. (NASDAQ:NFLX) saw an opportunity in renting movies more conveniently and cheaply by streaming them over the Internet. Hastings began promoting his company as a friendly rental underdog and grew in subscribers. Blockbuster realized the importance of Netflix’s business model in 2004. But it was too late as Netflix’s subscriber base had reached 4.2 million by 2005. Hollywood studios became more interested in offering it movies to rent.
Netflix growth story to continue
While Netflix, Inc. (NASDAQ:NFLX) continued to attract new subscribers, Blockbuster filed for bankruptcy in 2010 after losing $1.1 billion. At the time, Blockbuster’s market value was at just $24 million, compared to about $13 billion of Hastings’ company. DISH Network Corp (NASDAQ:DISH) purchased Blockbuster for $320 million in 2011. DISH Network has decided to shut down all the remaining Blockbuster stores.
On the other hand, Netflix, Inc. (NASDAQ:NFLX) issued solid guidance for the current quarter. The company continues to improve its offerings by adding more original content and external programming.
Netflix, Inc. (NASDAQ:NFLX) shares skidded 0.65% in pre-market trading Monday to $383.58.